Is America’s income tax too progressive?

I’m not an expert on UK taxation, let alone US, but that two eminently sensible people can hold opposite views illustrates the complexity of the subjecy.

Felix Salmon: None of this is likely to come as any surprise to tax wonks, but it’s well worth publicizing as Barack Obama now wades into the turbulent waters of long-term fiscal policy. The simple fact is that corporations and the rich aren’t paying as much tax as they have to if we’re going to make a serious dent in the deficit. And although anybody pointing that out is always going to risk being tarred as a class warrior, the country is not going to make any serious progress, fiscally speaking, unless and until it grows up and addresses that fact face-on.

Will Wilkinson: But you wouldn’t know it listening to Mr Obama. He repeatedly and misleadingly portrayed the tax burden carried by America’s top earners as unfairly light, and the top-rate tax cuts under President Bush as a leading cause of America’s dire fiscal straits… In any case, to the extent our woes flow from a paucity of revenue, the problem is that America’s vast middle-class pays too little, not that its rich do. The widely-admired Scandinavian countries collect a much larger portion of GDP in taxes not because their top earners bear a relatively larger tax burden than do America’s top earners, but because they don’t. The president’s confusion on this matter was evident in his open admission that “I agreed to extend the tax cuts for the wealthiest Americans because it was the only way I could prevent a tax hike on middle-class Americans”. But without a tax hike on middle-class Americans, there’s simply no hope for serious deficit reduction. That is, there’s no hope as long as Mr Obama insists on cutting spending with a “scalpel” and “not a machete”. Were he really serious about deficit-reduction, Mr Obama would have let all the Bush tax cuts expire. 

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